5 investment risks you should be aware of

Volatility is back and the BSE Sensex closed at below 36,000 level almost 1,000 points below its January peak on Monday, January 28. Stock market risk is just one of the few risks involved while investing in mutual fund. We do not stop living just because there are various types of risks in life.  Likewise, you should not stop investing just because of the various risks involved while investing. The best way to manage your investment risk is knowing about the risk.

Out of all type of investment risks, following are the five prime investment risks that you should be aware of before you start your investment journey.

Stock Market Risk: This is one of the most widely acknowledged risks. Anything that impacts the corporate profits can lead to the rise or fall in the stock market depending upon the event.
Interest Rate Risk: Although this impacts both equities as well as debt-oriented funds, the impact is more and direct on debt-oriented funds. The equity funds also get impacted but not with the same vigour.
Natural Calamities: Natural disaster is always unwelcomed and causes a lot of damage to both property and life. It also leads to great losses financially and affects corporate profits. The recent flood in Kerala has adversely impacted banks that derive maximum business from Kerala.
Geo-Political Risk: In an increasingly globalised economy and interconnected world, events in any one part of the world would have a ripple effect in other parts of the world. Hence, the financial market will also get impacted by events in any part of the world. The recent trade tension between China and the US had its own impact on the world share markets.
Socio-Political Risk: As we are approaching the election year, one could easily understand how political uncertainty can lead to volatility in the equity markets. A case of hung parliament can lead to delays in policy implementation and hinder future business prospects.